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Zoning

Have you considered the legal ins and outs of setting up a business in a residential area? You will need to know about zoning.

Juliet Pitman

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Zoning

Someone wise once said, “Rules are not necessarily sacred; principles are.” For the entrepreneur with a maverick bent, this might sound appealing. But mavericks, although they are known to make pots of money given the right conditions, also have the unfortunate habit of running into difficulties with lawmakers; if you want your business to survive, playing by the rules is sometimes the smartest thing you can do. There are certain laws that have to be followed if you want to operate certain kinds of businesses.

Take, for example, the application for a trading licence. You have dreams of opening your own restaurant but before you don your chef-cum-businessperson’s hat, you have some admin work to do.

To secure a business licence for any of these activities, you need to apply to the Licensing Department. You will be required to submit reports from the town planning, health and fire departments, all of which may need to inspect your intended premises for zoning, type of business activity, health and fire regulations. If you intend building or altering premises for your particular business, you will also be asked to submit your proposed business plan or how you intend to make alterations to existing premises.

The Health Department will ensure that the premises are hygienic and clean in accordance with the stipulations made by the Health Act while the Fire Department will check that the premises comply with fire safety regulations. Town Planning checks that the geographical area is zoned for business (see below). Once all these authorities are satisfied, the council can issue you with a licence. It is entitled to inspect your premises and if your business changes owners, premises or activity, then a renewal licence is required.

The Home Office

But what if your business does not fall into any of the categories mentioned above? You want to open a simple consultancy, for example. You start out on your own, as so many entrepreneurs do, at home in your spare room. No inconvenient trading licences to worry about. As you take on some support staff, you hire your first few square meters of office space. Times are good and suddenly your new business is legit and firing on all cylinders. Clients are happy, word of mouth has taken care of your marketing and you’ve had to take on more staff to cope with the increased workload.

All of a sudden you no longer fit into the modest office space you hired for your fledgling business and you have to think about expanding. But you’ve been paying rent for over two years and it seems such a waste. And now that you think of it, you were considering selling your substantial home and moving into a lock-up-and-go townhouse. It occurs to you that perhaps you should keep the house (it’s an asset after all) and convert it into business premises. That way you’ll save on rent.

On the surface it all seems to make perfectly good business sense. Except for one thing. Your house is in a residential area and therefore not zoned for business purposes. In order to trade as a business on those premises, you will have to apply for the property to be rezoned – and the time and energy needed to achieve that may make another year’s worth of paying rent not seem so onerous after all.

If you are operating a one-person business, don’t employ staff and don’t have clients calling regularly at your premises, you don’t have to apply for business rezoning. But if you need to put up signage, expect clients, suppliers and staff, and if the property is used solely for business purposes then, in all likelihood, you’re in for a rezoning application.

The Rezoning Battle

But here’s the catch – applying for a property to be rezoned as a business in no way means that it will automatically happen. As South African cities boom with business growth and congestion becomes an ever-increasing cause of frustration and wasted time, businesses are moving out of the CBD and into what were previously residential areas.

This is a natural phenomenon of urban geography and over time, as residents realise the potential value of selling up their homes to businesses that want to move in, areas are rezoned for business. However, if an area is not yet zoned for business, the residents usually have fairly strong objections to it becoming so. Businesses generate traffic and parking problems. Local councils typically take the concerns of residents seriously and are reluctant to rezone an area for business on the strength of one application. Add this to the fact that every local authority has a different set of parameters which guides rezoning decisions – and that each application is taken on its individual merits – and the process becomes extremely complicated.

Ultimately, if you want to avoid the daily horrors of traffic and purchase your own business premises in a residential neighbourhood, your best bet is to set up shop in an area in which other businesses are already established. After all, there is strength in numbers and this greatly improves your chances of getting the area rezoned.

To apply for rezoning in an area that is not zoned for business, you have to secure a zoning scheme departure or special consent from the City Council. Getting this can take a while – in some cases up to three months. You may need to advertise your business’s intention to conduct a particular business activity in the local newspapers. Residents and other stakeholders will have the chance to respond with any complaints, which are heard by a board, before you will be granted or denied the departure. Being granted a departure usually paves the way for successful zoning approval but, once again, there are no guarantees. And all the while, you can’t operate legally as a business in that particular area.

When it comes to the legal side of setting up a business, it pays to do your homework and get professional assistance where appropriate. The cost of mistakes and bad judgement calls in this area can be severe.

Trading licences

Trading licences are governed by the Business Act of 1991, No. 71, which states that certain businesses require licences. These include:

  1. Those that sell or supply meals or perishable foodstuffs
  2. Those that provide certain types of health facilities or entertainment. These are defined as Turkish baths, saunas or other health baths; massage or infrared treatment; escort services (male and female); games halls that have coin- or token-operated mechanical or electrical devices or three or more snooker or billiard tables; night clubs and discothèques; cinemas and theatres, and “adult premises” as referred to in section 24 of the Films and Publications Act, 1996
  3. Those that hawk meals or perishable foodstuffs

Juliet Pitman is a features writer at Entrepreneur Magazine.

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Alan Answers: Do You Understand The Basics Of Attracting Attention?

Whether you want to be a public speaker, find an investor or land a big sponsorship deal, the secret lies in how well you can tell your story.

Alan Knott-Craig

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I have always wanted to be a public speaker yet I’m very anxious about crowds and my public speaking is rudimentary at best. What should I do? — Lwazi

I was a terrible public speaker. I sometimes still am terrible. But I’m much better than I used to be. The way I got better was twofold. First, I’ve done hundreds of speeches, many of which were very embarrassing. The result is that I’ve overcome my fear of embarrassment (I’m still alive, turns out public humiliation is not fatal), and I developed confidence in speaking to crowds. Second, I read lots of books on speaking, including Thank You for Arguing by Jay Heinrichs.

My main takeaways from books are as follows:

  • Tell a story. People love a story.
  • Don’t read it. The easiest way to lose the crowd is to read your speech.
  • Keep slides to a minimum.
  • Have a memorable start and end. The middle is not so important.
  • Dress the part. Act the part. Don’t sabotage your speech by dressing sloppily. Put your shoulders back. Look confident.
  • Have a rational argument. Appeal to the logic of a situation.
  • Give background on yourself to establish your credibility. The medium is the message (read Marshall McLuhan)
  • Pull on the heart strings. Appeal to the audience’s emotions. Make folks laugh. They may forget what you said; they’ll never forget how you made them feel.

Public speaking is like swimming. Knowing the theory won’t stop you from drowning. You have to practice, practice, practice. You have to embarrass yourself regularly so you can overcome the fear of embarrassment. I’m told that Toastmasters is a brilliant organisation for practising in a safe environment.

On a side note, all of the above tips are important for entrepreneurs and sales people as well: After all, selling your business as a start-up is selling yourself, and the best way to do that is with a great story.

Related: (Video) How to Fight Your Public Speaking Fears

How do I convince someone to invest in my business? — Anonymous

The first thing an investor wants to know is how you’re going to make money. Theories are not really useful. Ideally, you need to show a proven revenue model that can believably be scaled to ensure that you generate more money than you spend.

The second thing most investors want is to know that you’re on a rising tide. Photo shops are not on a rising tide. No matter how well you run your photo shop, you are doomed to be taken out to sea where you will drown and/or be eaten by sharks along with everyone else.

The third thing that most investors want to know is that you’ve already made mistakes with other people’s money. Better you earn your school fees on someone else’s dime. Don’t shy away from the setbacks you’ve had. Admit to mistakes, elaborate on lessons learnt. You can be forgiven for almost any business failure, as long as your integrity is not questioned.

How do I find sponsors for an event? — Stephanie

Before you approach sponsors, first define your event’s audience. Make a list of potential sponsors who share that audience. For example, if you are hosting an entrepreneur event, think of companies that target entrepreneurs.

Once you have written down all the company names, start mining your personal network for anyone who works in one of those companies. You need to get to the CEO.

Sometimes a marketing director or executive is sufficient, but most times, especially if speed is essential, the CEO is the only person that won’t waste your time.

Be sure to use LinkedIn to explore relationships that people you know have in the companies. Maybe a friend of yours knows the CEO. The quality of an introduction via a mutually trusted friend is not far removed from a personal direct relationship.

Related: How do I start an events company?

Create a simple pitch deck. Be sure to include in the deck the benefits for the sponsor. No one really cares about the benefits for the audience, or for you, the organiser. Think about who is writing the cheque, that’s who you’re selling to.

Always give potential customers three options. People want options. Not too many to confuse, three is the magic number. The middle option should be the package you prefer the sponsor to choose. Most people choose the middle option.

Once that’s all done, start pitching. Do whatever it takes to get in front of the CEO. Then sell your dream. Don’t stress if you’re rejected. ‘No’ is better than ‘maybe.’ It saves you wasted time. Keep moving until someone bites, then stop moving and close the deal.


Listen to this

Alan’s audible book Be a Hero: Make Life an Adventure is now available on amazon.com and Audible.com

Read by Alan himself, Be a Hero is a collection of stories on how to make your life an adventure by changing your mindset and tackling adversity.

Go to amazon.com or audible.com to download your copy. Be a Hero is also available in Kindle and paperback through Amazon.com.


Read ‘Be A Hero’ today

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Simple Tips For The Small Business Owner To Manage Cash Resources Efficiently

How to manage the funding of the operational and trading needs of your business.

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The entrepreneur needs to know what is happening in his bank account at all times

At the time of launching the business and whilst preparing the annual budget, the funding required for the various parts of the business should have been determined.

This would have included the long- term funding of assets such as computers, plant and equipment, buildings etc. which, if funded, are normally paid off on a once a month basis.

At the same time, the payment arrangements for the operational or trading side of the business will have been put in place. This could be by way of an overdraft or be self-funded.

It is an essential part of the business owners’ duties, to ensure that the business is operating within these funding constraints.

Related: Great Email Marketing Tools For Small Business

It should be noted that in most cases where funding has been obtained the business owner would have signed personal surety so should the business fail he or she would be liable to make good any such debt.

How to manage the funding of the operational and trading needs of your business

Operational Cash Flows

These are the revenues received less the operating expenses incurred in order to achieve those revenues. The level of revenues and expenses should have been determined in the budget and that budget forms the guideline as to what kind of profits we should be achieving.

We thus need to constantly monitor:

1. Sales

Sales are the lifeblood of any business. Use the budget to determine what your daily sales are going to be and check daily. The entrepreneur must also be aware of the extent of cash sales to credit sales.

2. Gross margin

This is the difference between the selling price and the cost of the item sold and must be high enough to cover the overhead expenses the business incurs monthly.

3. Expenses

There are 2 elements here, one being the cost of sales and then the expenses such as salaries, rent, stationery etc.

Related: How The SA Government Can Help Small Businesses Thrive

Ensure positive cash flows

positive cash flows

  • Revenues must be greater than expenses. Once your revenues fall below a certain level your business will be using cash not generating cash
  • A large part of your total expense bases consists of what we call fixed costs and are not affected by the level of revenue. An example would be:
    • rent payable. You would have to pay your rent even if you made no sales.

Costs that vary depending on sales levels are known as

  • variable costs – A good example of a variable cost would be the cost of
    • commissions payable to salesman. I.e. the more the sales the more the commissions.

The second part of daily cash management is the

  • Management of working capital which consists of :
  1. a) stock
  2. b) debtors
  3. c) creditors.

Any inefficiencies here could have a severe impact on cash flows.

Stock

You always need to monitor your stock levels, as stock that lies idle on your warehouse floor is costing money. Software that monitors your stock levels and determines your fast-moving items, as well as determines your optimum levels and reorder quantities, is essential to proper management.

Related: Smart Money For Small Businesses

Debtors Balances

You must have a credit policy which must be enforced. Make sure that you provide in your budget for nonpaying debtors, as some of your customers will not pay you on time if at all.

Set credit limits and enforce them. Stop supply if payments are not being made in time. It is never wise to be reliant on just one or two major customers. Management of your debtors is critical to the success of your business.

Creditors

It is so important that you obtain the best possible terms from your suppliers. This is vital in businesses where the margins are tight and in industries where payment from customers is slow.

You must be careful to ensure that you do not pay your suppliers faster than you receive your cash from your debtors. Suppliers will try and entice you with settlement discounts, but this will not help if your customers (debtors) are taking too long to pay you.

Your business

The small business owner needs to pay attention to these areas to be successful. These are very basic guidelines on the management of cash and it is recommended that the small business owner research this topic further and customise to his own business.

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